Primerica and Travelers Stand Out as Insurance Industry Sees 11.7% Growth
Insurance firms play a critical role in the financial system and have recently seen strong underwriting results and rising investment income boost profitability. The industry has gained 11.7% over the past six months, closely following the S&P 500.
Despite this growth, investors are advised to be cautious due to insurers' cyclical nature, with exposure to claims risk and regulatory changes affecting their performance. We have identified two resilient insurance stocks worth considering and one that we believe will underperform.
Fidelity National Financial (FNF) is a title insurer with significant market share in the US, but it has struggled with declining policy sales and earnings per share over the last five years. Its book value per share has also decreased annually by 2.1% during this period.
On the other hand, Primerica (PRI) has seen pre-tax profits increase as it gained leverage on its fixed costs and became more efficient. Share repurchases have further boosted shareholder returns, with annual earnings per share growth exceeding revenue gains over the last five years. Travelers (TRV) has also expanded its pre-tax profit margin by 10.9 percentage points over the last two years, driven by scale and efficiency improvements.